Foreign-sourced capital to dwindle as from 2018

Total foreign-sourced capital for projects will gradually decline as from 2018, when Vietnam will completely graduate from official development assistance (ODA), leading to more prudent consideration of projects using less preferential loans, according to Prime Minister Nguyen Xuan Phuc.

A view of the Cat Linh - Ha Dong rail route, which is funded with Chinese capital, in Hanoi

The Government leader made a written answer to a query of National Assembly deputy Hoang Quang Ham, who is also a member of the National Assembly’s Committee for Financial and Budgetary Affairs.

PM Phuc noted that under the medium-term public investment plan for 2016-2020, total medium-term investment capital sourced from the State budget is 2,000 trillion VND in maximum. Of the sum, 300 trillion VND is foreign capital allocated from the central budget, including a backup worth 30 trillion VND.

The medium-term foreign capital of 270 trillion VND basically meets the actual disbursement demand of the projects listed in the medium-term plan.

Additionally, to make use of concessional loans such as those from the International Development Association (IDA) and the Asian Development Fund (ADF) before Vietnam completely graduates from ODA because it already became a middle-income country, the Ministry of Planning and Investment obtained the PM approval to negotiate and sign some new project agreements in 2016 and 2017 with an estimated disbursable capital of 29 trillion VND, which matches the backup of 30 trillion VND in the medium-term plan.

However, some unexpected problems arose such as adjustment to total investment of some ongoing projects and changes in some projects’ financial mechanisms.

Therefore, it is necessary to review the medium-term public investment plan for 2016-2020 so as not to affect the progress and effectiveness of projects and Vietnam’s relations with development partners and sponsors, PM Phuc said.

Regarding the growth slowdown in the first quarter compared to the fourth quarter of the previous year, the PM said it is a normal phenomenon considering the fact that the long Lunar New Year (Tet) holiday and traditional spring festivals in Q1 impact production and business activities. Meanwhile, in Q4, enterprises often augment production and business activities to serve soaring Tet demand and meet their annual targets.

The PM pointed out that GDP growth usually gains speed in the following quarters, noting that international organisations in Vietnam also recognised that this situation reflects the seasonal characteristic of economic growth in a year. Data show that GDP value in Q1 usually accounts for about 18 percent of the total annual GDP, Q2 24 percent, Q3 26 percent, and Q4 32 percent.